Novartis buys eye care giant Alcon for £23.8bn

Monday 4 January 2010 09:56 BST

Foresight: Novartis’s Daniel Vasella said eye care needs would grow

The pharmaceuticals industry was set alight today as Novartis splashed out $38.5 billion (£23.8 billion) to take over Alcon, one of the world's biggest makers of contact lens solutions and surgical eye parts.

In buying Alcon, the world's largest eye care company, which specialises in consumer products such as contact lens solution, Swiss firm Novartis has set the trend for Big Pharma's move into over-the-counter healthcare. The deal is one of Europe's biggest ever takeovers.

Alcon totted up sales of $6.3 billion for its contact lens solutions, such as Opti-Free, and surgical eye products such as artificial lenses in 2008. That revenue will be a vital boost for Novartis, known for its blockbuster drugs such as Diovan for blood pressure and Gleevec for cancer, both of which start to come out of patent in the US in 2012.

Novartis makes contact lenses through its CIBA Vision division, but with Alcon in its portfolio the firm will have 70 per cent of the eye care market. It bought a quarter of the business from Alcon's owner, chocolate-to-healthcare conglomerate Nestlé, for $10.4 billion in April 2008.

The deal gives Novartis another 52 per cent of the company for $28.1 billion, taking the total cost of a 77 per cent majority stake to $38.5 billion. Novartis said it would be able to shave $200 million off costs within three years.

Novartis's chief executive, Daniel Vasella, said the deal would "strategically strengthen" the firm's healthcare portfolio and that eye care was "a sector with dynamic growth due to the increasing patient needs of an aging population".

"This is the right time to simplify Alcon's ownership to eliminate uncertainties for employees and shareholders. It's a great strategic fit," he said.

Consumer healthcare is one of Big Pharma's key growth areas as the world's biggest blockbuster drugs see their patents run out, meaning crucial revenue streams will dry up as generic drugmakers move in.

Britain's biggest pharmaceuticals firm, GlaxoSmithKline, raked in £3.9 billion from its consumer arm in 2008, mainly from its big-name brands such as Ribena and Lucozade drinks, toothpaste Aquafresh and Nicorette chewing gum.

Pfizer's $68 billion acquisition of Wyeth last January, the biggest pharma deal of the decade, gave the maker of Viagra a huge portfolio of over-the-counter goods, including Centrum vitamins and Chapstick lipbalm.

Last month, Sanofi-Aventis, the French pharma group, spent £1.9 billion buying consumer healthcare group Chattem, the maker of over-the-counter products such as Gold Bond powder, Selsun Blue anti-dandruff shampoo and Icy Hot cream. The acquisition was part of the company's push to move away from a reliance on prescription medicines.